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The Theory of Human Capital Revisited: On the Interaction of General and Specific Investments

  • Christoph Luelfesmann

    (University of Bonn)

Human capital theory distinguishes between training in general-usage and firm-specific skills. Becker (1964) argues that employers will only invest in specific training, not general training, when labour markets are competitive. The article reconsiders Becker's theory. Using essentially his framework, we show that there exists an "incentive" complementarity between employer-sponsored general and specific training: the possibility to provide specific training leads the employer to invest in general human capital. Conversely, the latter reduces the hold-up problem that arises with firm-specific training. We also consider the desirability of institutionalised training programmes and the virtues of breach penalties, and discuss some empirical facts that could be explained by the theory. Copyright 2006 The Author(s). Journal compilation Royal Economic Society 2006.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 0659.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:0659
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